The Film Industry Finds A Friend In The Vcr

August 28, 1985|By Aljean Harmetz, New York Times

HOLLYWOOD — In the bare-knuckled brawl among new entertainment technologies, the videocassette has crushed the videodisc, rolled over the video game, outmaneuvered pay-cable movie channels and outdistanced home computers. Now the videocassette industry -- one that did not exist eight years ago -- is attracting almost as much money as movie box offices.

In 1985, revenues from the rental and sale of prerecorded videocassettes will reach $3.3 billion, according to the Fairfield Group, a market research company. Receipts from the box office surpassed the $4 billion mark for the first time in 1984. But with the movie industry in the midst of the slowest summer in the last five years, they are likely to drop in 1985 to about $3.7 billion.

The increase in the sale and renting of videocassettes has closely followed the dramatic rise in the sale of videocassette recorders. In 1985, VCR's have been selling at a rate of almost one million a month, 60 percent above last year's record sales. According to a study by Young & Rubicam, the advertising agency, by early next year the machine will be in one-third of all American homes -- establishing the VCR as a mass medium similar to cable and color television.

Few in Hollywood, however, believe that the videocassette can limit the theatrical life of film.

''Blaming videocassettes is an excuse for bad movies,'' said Art Murphy, an industry analyst. ''Videocassettes do not cannibalize theaters, because the 25 percent of moviegoers who buy 85 percent of the tickets are impulse buyers. They are not going to wait months to see a movie on cassette.''

Rather, the videocassette is seen as a major source of revenue for the film industry. In 1982, the average new movie got 65 percent of its revenues at the box office and 8 percent through home video, according to a report by Harold Vogel, an analyst at Merrill Lynch, Pierce, Fenner & Smith Inc. In 1985, theaters are expected to bring in 48 percent of the revenue, while home video will be responsible for 18 percent.

Instead of draining off theatrical revenues, most analysts believe, videocassettes are gaining at the expense of pay-cable. During the last six months the two largest pay-movie channels, Home Box Office and Showtime, lost subscribers.

Five years ago, videocassette rights to movies sold for $100,000. Recently, videocassette rights to The Cotton Club were sold to Embassy Home Entertainment, one of many independent videocassette suppliers, for $4.7 million. Prizzi's Honor was bought by Vestron Video for $4.2 million.

Neither movie was a major box-office hit. Indeed, some movies actually derive more from videocassette sales than they do in box-office receipts.

''A lot of movies are doing better on cassette than they did in theaters,'' said Nicholas Santrizos, president of Thorn EMI-HBO Video. ''Flashpoint did $3 million at theaters. At our wholesale price of $50, we've sold 66,000 Flashpoint cassettes for $3.3 million. There's no question that America has developed a new habit.''

The five biggest suppliers of videocassettes are movie companies: CBS-Fox, Paramount, RCA-Columbia, Disney and Warner Brothers. They make money selling cassettes of their movies to distributors who sell them to stores, but they make no money from rentals. Since few movies sell well to the average VCR owner, the studios and smaller suppliers try to produce cassettes that customers will want to buy, such as exercise programs or music videos.

Among the new entries in this market are Esquire magazine's ''Success Tapes.'' Due to be released in October, the tapes are aimed at the affluent young, covering such subjects as ''professional style,'' ''persuasive speaking'' and ''entertaining with wine.''

But the hottest category in the market recently has been children's programming.

Western Publishing, the publisher of Little Golden Books, is currently shipping eight ''Golden Book Videos'' of such stories as Pokey Little Puppy and Richard Scarry Nursery Tales. According to Bill Nahikian, vice president of marketing, the cassettes will be marketed as books-on-video for 3- to 8- year-olds and sold in bookstores and department stores, with retail prices that may be as low as $9.95. Nahikian said he had more than 200,000 orders for each cartridge.